Testimony to MTA Board: Gov. Cuomo’s $145M Raid is a Backdoor Tax on MTA Riders

Good morning. I am Rachael Fauss, Senior Research Analyst for Reinvent Albany. We advocate for more transparent and accountable New York government, including for state authorities like the MTA.

Since the April 2020 state budget gave the Governor the ability to “withhold” money from crucial state service providers like the MTA, we and other transit advocates have been concerned about possible raids on MTA funds. As of February 2021, we now know as covered in the New York Daily News that the Governor plans to raid $145M in dedicated taxes – including about $100M from the Metro Mass Transportation Operating Assistance Fund, and $6.5M from the Central Business District Trust Fund.

These raids are unacceptable. The MTA faces the largest financial crisis in its history and has been repeatedly downgraded by bond raters. Raids of dedicated transit funds are a backdoor tax on MTA riders, paid in the form of fare hikes or service cuts. Raiding dedicated transit funds breaks trust with the public, who pay these taxes with the understanding that they will fund transit service — not prop up the state’s general fund. Raids also undermine the MTA’s credit rating by creating uncertainty about whether dedicated funds are truly dedicated and reliable.

Notably, the proposed fare and toll increases were projected to bring in $148M for the MTA – nearly the same as the state raid. The Legislature must reject this $145M raid on MTA dedicated funds.

While we now know how much the Governor plans to raid for next year’s budget, the MTA and NYS Division of the Budget (DOB) have still not answered exactly how much money NYS has taken from the MTA in the current year’s budget (is it $261M or is it more now?), and how much will be paid back to the MTA.

This is because the MTA rebaselined its budget in 2020 using projections from McKinsey (which also has a contract with the state) — moving the goalposts on how much state money it says it will receive. This has obfuscated the amount of money taken by the state from the MTA. In response to questioning on this issue from the State Legislature on January 26th, CFO Bob Foran said that the MTA would be receiving “more money than we had in our budget.” This is basically like an employer taking money from your paycheck, and then at the end of the year paying only some of it back and calling it a “bonus.” The net effect is less money for MTA riders, with the state raiding the MTA’s dedicated taxes for its general fund.

Without transparency of the money, as taxpayers, we can’t hold state government accountable, and as fiduciaries of the MTA, the Board cannot uphold its duty to the agency, bondholders and riders. Indeed, the state’s holding back of dedicated funds was cited by Kroll, a bond rater, in a downgrade last year saying, “The delay of funds is inconsistent with KBRA’s expectation of uninterrupted State support of MTA operations…the timely release of State appropriated funds is critically important.”

We therefore ask the MTA to show riders exactly how much money NYS owes the MTA from money taken in 2020.

Thank you for your consideration.